High Court Quashes Section 264 Order, Reaffirms Binding Nature of ITAT Special Bench Rulings

The petitioner, Samir N. Bhojwani, challenged a revisional order dated 5 September 2025 passed by the Principal Commissioner of Income Tax under Section 264 of the Income Tax Act, 1961. It was undisputed that the facts were materially identical to an earlier writ petition already decided by the Bombay High Court, where the Revenue had been faulted for refusing to follow the binding decision of the ITAT Special Bench in SKF India.

The Principal Commissioner passed the impugned Section 264 order without following the Special Bench ruling. It was further noted that the petitioner’s application for condonation of delay had already been allowed by the Principal Commissioner and that such order had attained finality, having not been challenged by the Revenue.

Main Issue: Whether the Principal Commissioner can ignore a binding decision of the jurisdictional ITAT Special Bench while exercising powers under Section 264 of the Income Tax Act.

HC’s Decision: The Hon’ble High Court quashed and set aside the impugned order dated 5 September 2025, passed under Section 264, and remanded the matter to the Principal Commissioner to pass a fresh order in accordance with the decision of the ITAT Special Bench in SKF India.

The Court clarified that it was not examining the correctness of the Special Bench decision onthe  merits. However, it categorically held that so long as a binding precedent of the jurisdictional tribunal exists, the tax authorities are bound to follow it, and judicial discipline cannot be compromised merely because the Department disagrees with the ruling.

The Court also directed that since condonation of delay had already been granted and had attained finality, the Principal Commissioner shall not reopen that issue. The authority was directed to decide the matter on the merits and pass a fresh order. The writ petition was allowed with no order as to costs.

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